New Willets Point project would cost taxpayers a lot more than old one

De Blasio plan differs dramatically from original proposal

The plan announced this week by Mayor Bill de Blasio to build 1,100 units of affordable housing in Willets Point has the city subsidizing affordable housing directly, rather than waiting for market-rate units to cross-subsidize them as envisioned in a 2012 blueprint. The former plan was sunk by the Court of Appeals because it involved building a large shopping mall on parkland.

Related Cos. and the Wilpon family jointly submitted plans in 2012 that entailed about 2,500 market-rate and affordable units on 23 acres, in addition to hotels and retail. The de Blasio administration said the exact amount of city subsidy earmarked for those affordable units had not been determined, but the 875 affordable units would have made up just more than a third of the total count. That suggests the developers would have been ineligible for many subsidies beyond as-of-right tax breaks. Related and the Wilpons maintained the project’s mall and entertainment center were supposed to make the larger project economically feasible.

“The initial transaction was not going to result in housing getting built on any realistic time frame,” a City Hall spokeswoman said in a statement. “To get these apartments built here and now, we’ve peeled away speculative elements like the shopping mall and structured this like any other affordable-housing project.”

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The decision makes the project much more politically palatable, and will allow the mayor to count them toward his numerical goal for new affordable units. But it also means the city likely will be putting more taxpayer money into the affordable apartments.

Midrise affordable housing on city land typically costs about $350,000 per unit, so the Willets Point project could have a price tag in the neighborhood of $385 million. The developers will likely put in some equity themselves, but will largely finance the project through government bonds and loans.

Some of the money to pay off those loans will come from low-income-housing tax credits, a federal program that gets investors like banks to pay for around a third of a project’s cost in exchange for a tax break. In this case, the credits would amount to about $127 million.

Under a typical deal of this size, the city would be expected to chip in around $200 million for loans that would need to be paid back if the developers try to take the project market-rate once the affordable-housing regulations expire, usually after 30 years. If that doesn’t happen, however, the loans could be restructured or extended.

And if the developers take home typical returns from the project, usually around 7% of the total cost, they could expect to pocket around $27 million from some combination of upfront fees and income from rent over the life of the project. However, the administration could structure the deal differently; the implication is that Related and the Wilpons will be building whatever a task force recommends be constructed on the 17 acres of land that make up the rest of the first phase. In addition, the developers will need to clean up the contaminated land beneath the site. Initially, the city was supposed to pay for much of this cost in a grant, though City Hall said the arrangement is being reconfigured.

The project will also include 20,000 square feet of retail and a school that will be funded by the School Construction Authority but built by the developers.